Fogo de Chão Sold to Firm for $560M in Cash

Fogo de Chão, Inc. announced Tuesday it has entered into an agreement to be acquired by Rhône Capital in an all-cash deal valued at $560 million, or $15.75 per share. The figure represents a 25.5 percent premium to the company’s closing shares on February 16.

The deal completes what the churrascaria chain called a “comprehensive strategic alternatives review process” taken by the company’s board of directors.

“After a thorough evaluation of the options available, the board of directors is confident that this transaction will provide Fogo a significant opportunity to realize the highest value for our stockholders while providing the best path forward for the Fogo de Chão brand, employees, and loyal customers,” said Larry Johnson, chief executive officer of Fogo de Chão, Inc., in a statement. “We are excited to enter into a new chapter for the company and confident that Rhône will be an invaluable partner as they have a proven and distinguished track record of supporting and driving profitable growth for companies around the world.”

Dallas-based Fogo de Chão expects the deal to close during the second calendar quarter of 2018. Behind an $88 million IPO, the company went public in June 2015. Rhône is a global alternative investment management firm with more than $5 billion in assets under management that focuses in “market-leading businesses with a pan-European or transatlantic presence and global growth opportunities.”

Fogo de Chão, which opened its first restaurant in Brazil in 1979, currently operates 38 U.S. restaurants, nine Brazil units, and two join venture locations in the Middle East (Jeddah, Saudi Arabia, and Dubai). It will be privately held under this deal.

The transaction was unanimously approved by Fogo’s board, the company said. Funds affiliated with Thomas H. Lee Partners, L.P. and certain of Fogo’s directors and executive officers, which collectively hold more than 60 percent of Fogo’s shares, also approved the transaction by written consent.

The brand was hit especially hard by hurricane activity in the third quarter, reporting consolidated comparable restaurant sales declines of 5.1 percent, with U.S. company-owned comps down 2.1 percent. But if you exclude the impact of hurricane activity during the quarter, Fogo de Chão said, U.S. sales decreased just 1.4 percent. Results in Brazil were soft as well. Company-owned comparable sales in Brazil plummeted 17.1 percent. This, also, was the result of extraneous factors. In this case, if you excluded the impact of the two Rio de Janeiro locations, comps actually rose 3 percent. These results included lapping last year’s Olympic Games and security issues in the city during the third quarter.

In early January, Fogo de Chão released preliminary, unaudited financial results for the fourth quarter. The brand showed improvement across the bard, with expected total revenue of about $88.8 million; consolidated comparable restaurant sales lift of 0.8 percent; U.S. company-owned comparable restaurant sales increases of 2.4 percent; and Brazil company-owned comparable restaurant sales decreases of 6.6 percent.

“We look forward to collaborating with Fogo and its talented management team to continue the growth of this exceptional business,” said Eytan Tigay, managing director of Rhône, in a statement. “The Fogo experience offers consumers an unsurpassed combination of quality and value in an authentic Brazilian churrascaria environment. We believe our firm’s global experience, relationships, and longstanding and expanding presence in Brazil is a natural complement to the company and will serve to facilitate Fogo’s domestic and international expansion plans. We look forward to working with Fogo’s management team to drive value for the company, employees, and customers in this new chapter for the brand.”

In November, Fogo de Chão hit the 50-restaurant milestone with openings Troy, Michigan, and Jacksonville, Florida.